The benefit of VMI strategies in a stochastic multi-product serial two echelon system
Computers and Operations Research
Echelon-stock (R,nT) control in two-stage serial stochastic inventory systems
Operations Research Letters
Joint shipment consolidation and inventory decisions in a two-stage distribution system
Computers and Industrial Engineering
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A two-stage inventory system is considered where Poisson demand occurs at Stage 1, and Stage 1 replenishes its inventory from Stage 2, which in turn orders from an outside supplier with unlimited stock. Each shipment, either to Stage 2 or to Stage 1, incurs a fixed setup cost. Under the assumption that the supply leadtime at Stage 2 is zero, we characterize a simple heuristic policy whose long-run average cost is guaranteed to be within 6% of optimality, i.e., a 94%-effective policy. The paper also provides heuristic policies for more general inventory systems and reports computational results.